British manufacturing is on course to contract by 16% during the recession, a fall comparable to that seen in the early 1980s.

The estimate from engineering lobby group the EEF highlights the continued pain in the industrial sector, which has yet to see any signs of a rebound.

Manufacturing output will grow just 0.5% next year, the organisation predicted.

Yesterday the British Chambers of Commerce lifted its forecast for overall economic growth to 1.1% for 2010, almost twice its previous forecast. But this is being led by service firms, rather than manufacturers.

In a boost for the economy, however, a report by payment processing firm VocaLink showed that take-home pay jumped the most in 18 months in August.

The news comes ahead of this week's Bank of England meeting, which is expected to see rates held at 0.5%.